What distinguishes "discretionary" accounts from "non-discretionary" accounts?

The distinction between discretionary and non-discretionary accounts centers on the level of control exercised by the investment adviser over the account. In discretionary accounts, the adviser has the authority to make investment decisions on behalf of the client without needing to obtain prior approval for each transaction. This arrangement allows for a more streamlined investment process, where the adviser can act quickly in response to market changes or investment opportunities.

This characteristic is particularly beneficial for clients who prefer to delegate investment decisions to a professional, trusting their expertise to manage the portfolio effectively. The adviser is obligated to act in the best interest of the client, adhering to the investment strategy agreed upon prior to taking on the discretionary authority.

The other options do not accurately reflect the distinction between these account types. For instance, discretionary accounts do not universally require regulatory approval, and non-discretionary accounts are not necessarily managed by compliance officers, but rather by registered investment advisers who do not have trading authority over the assets. Lastly, both account types do not share the same requirements; they have different regulatory frameworks and client consent requirements. Understanding these nuances is crucial for compliance and effective client management in the advisory context.